UK Households At Risk Of Savings Crunch

- Amount UK households have available to save each year is set to fall - Post Office warns UK is not saving enough and is in danger of returning to pre-recession spending habits - Cebr forecasts the average amount available will fall from £3,780 to £3,630 in 2014 – this, once adjusted for inflation, is a similar level to that seen in the 1960s* (also seen in 2000 and 1987) - By 2015, this figure will have dropped to £3,518, and will continue to fall to £2,944 by 2018- One in five (22%) UK savers expect to save a lower proportion of income this year compared to last year- Savers who set a target hope to save on average £956, but in reality they fall short by more than £500

The amount UK households have available to save is set to fall over the next five years, according to the Post Office’s Future of Savings study.

The study compiled by leading forecaster, the Centre for Economics and Business Research (Cebr)[i], looks at the changing trends in UK savings over the last 50 years, and forecasts how the UK’s savings habits are set to change.

While there is a growing sense of optimism that the economy has turned a corner, the amount of money available for UK households to save (the ‘potential saving’) is on the decline. Once housing and living costs – right down to holidays and pints bought in the pub - have been taken into account, the amount left at the end of each year to put into savings is set to fall for the foreseeable future. The rising cost of living coupled with increasing consumer confidence is thought to be the driver behind this forecast

This figure has fallen from £4,414 in 2010, to £3,780 in 2013 and is expected to fall further in 2014 to £3,630, and then again to £3,518 in 2015. By 2018, this pot will have been reduced to as little as £2,944. By the end of this year, the amount of money available for households to put into savings will be the same level as it was in the 1960s. Cebr predicts that around 70 per cent of this figure will actually be put into savings – with the rest accounted for by holding cash, storing money around the house or lending it to friends.

While spending is good for the economy, the reality of the situation is that people are simply not saving enough, with the findings indicating that the UK is in danger of returning to pre-recession spending habits. Of the one in four (26 per cent)[ii] UK adults that set themselves a savings target each year, a fifth (20 per cent) expect to miss this goal.

Furthermore, over a fifth (22 per cent)[iii] of savers are set to save a lower proportion of their income than they did last year. This is most likely to occur in the North West where almost a third (30 per cent) expects to save a lower proportion of their income. It’s a different story in London, however, with those who save hoping to deposit a higher proportion of their income than they did last year.

Commenting on the findings,Henk Van Hulle, Head of Savings and Investments at the Post Office said: “While the economy is on the up and inflation remains low, our findings suggest that UK households are in danger of not saving enough. Reverting back to old spending habits can be easily done but this will have a detrimental effect on the amount we have to save each year.

“Even though the cost of living remains one of the biggest factors preventing people from saving more, it’s crucial that people understand the importance of saving. Whether it’s paying for a broken boiler to be fixed, or paying for a family holiday or retirement.

“While it’s not always easy to save, putting a little to one side often would go some way to transforming the UK’s savings landscape.”

Perhaps, unsurprisingly, its’ the wealthiest 40 per cent of the UK that is doing almost all of the nation’s saving, with more than £18,000 available to put into savings. In comparison, the lowest income households are not saving at all, and haven’t done consistently from 2002 – 2014. Cebr predicts by the end of 2014 this group will end the year with no savings and an average debt of £1,910.

Henk Van Hulle adds: “If the UK’s savings habits don’t improve, we’ll be left in a situation where far too many of us have inadequate savings pots, putting more financial stress on people in later life.”

Ends

Are you saving a higher or lower proportion of your income than you were last year?[i]

About Post Office: Post Office Limited has an unrivalled national network of over 11,500 branches across the UK, more than all the high street banks combined, and sits at the heart of many communities across the country. The Post Office has made a commitment to no more branch closure programmes. It provides around 170 different services and products spanning financial services including savings, insurance, loans, mortgages and credit cards. Post Office also offers Government services; telephony; foreign currency; travel insurance and mail services.

It serves around 18million customers a week and a third of small businesses. 99.7% of the total population live within three miles of a post office. For many rural communities the post office is the only retail outlet. Post offices remain highly valued and trusted and are the focal point for many communities. For more information, visit www.postoffice.co.uk

[i] Research carried out by Opinium on behalf of Post Office. 2,001 UK adults were surveyed between 22-25 April 2014.

About the Post Office

The Post Office (Post Office Limited) has an unrivalled national network of over 11,500 branches across the UK, more than all the high street banks combined, and sits at the heart of communities in Northern Ireland, Scotland, Wales and England. The Post Office has made a commitment to maintaining its network of branches at its current size and reach. It provides around 170 different products and services spanning financial services including savings, insurance, loans, mortgages and credit cards; Government services; telephony; foreign currency; travel insurance and mail services.

The Post Office serves over 17 million customers a week and a third of small businesses. Some 99.7% of the total population live within three miles of a post office and over 97% live with one mile of a post office. For many rural communities, the post office is the only retail outlet. Post Offices branches remain highly valued and trusted, and are the focal point of many communities. For more information, visit http://www.postoffice.co.uk/.

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Related / News

- The poorest 20 per cent of UK households have had no potential savings1 – money available to save - since 2002
- Meanwhile, the highest-earning 20 per cent of the population will have an average £18,680 to save this year
- The savings gap between the richest 20 per cent and the poorest 20 per cent currently stands at over £20,000